I was listening to Radio New Zealand’s podcast on my way home from work and I heard an interview about a bank in Sweden that offers interest-free loans. Now before you think scam, there is a large awareness in some circles that banks can be supported locally, and do not need to necessarily be growth-oriented. JAK Bank works like this: Say I want a loan for $52 a year. I would then pay back $2 a week for 52 weeks, paying down $1 for the principle. But what about the other $1, you say. Well, the other $1 is actually your savings. No, you didn’t read me incorrectly. It’s YOUR savings, to be withdrawn upon completion of your principle loan payments. While you are paying down your loan, the money is then used to loan to others in your community.

I found this to be a very intriguing concept, one that I can identify with. My only question is what happens when people default on their loans, and how often does that happen? The only thing I know so far is that to get approval for your first loan is actually very difficult, but every subsequent loan becomes easier to find approval.

Is it a house of cards? If one loan defaults, would it cause a massive chain reaction of defaults? I’m not sure, but here are some other articles on the matter. Hope it helps.

 How Interest-Free Banking Works

JAK Bank (Wikipedia)

Saving Together

 JAK Bank (English information)